What you can do about the rising cost of home insurance

Home insurance costs are rising and Americans are forced to make difficult decisions to reduce coverage or make major changes to save their portfolios.

According to the Insurance Information Institute, the national average annual homeowner’s insurance premium is now $1,398. According to the group, premium rates rose by an average of 11.4% between 2017 and 2020. This figure is higher than the national inflation rate of 7.9% in those years.

Premiums have continued to rise this year, with average interest rates rising from 4.8% in the second quarter to 6.6% in the third, according to MarketScout, which monitors interest rates. In parts of California and Florida, costs have risen as much as 25 percent, and homes with more than $20 million hit by fires face even higher increases, according to MarketScout.

The rise in home insurance premiums is largely due to many of the same factors that underline other parts of the US budget. For example, rising prices of building materials and other disruptions in the supply chain lead to repair and recovery costs for insurance.

Home insurance companies face another serious problem.

Risk models and industry leaders predict that US insurance losses from hurricanes, hurricanes, wildfires, and other disasters in 2020 will exceed $370 billion in 2017.

Kevin Mahoney, certified financial planner, founder and CEO of Illumint, a financial advisory firm for young couples, says: This also falls into the category of people who are in some ways experiencing inflation and seeing higher premiums. ”

The major insurance company Travelers Cos. Michael Klein, president of personal insurance, told analysts this week that home insurance costs exceeded company expectations in the third quarter “due to a combination of rising labor costs and rising materials prices.”

The company announced: “We will continue to strive for appropriate price increases.”

Travelers was one of the first real estate insurers to report quarterly earnings, and results are closely monitored like any other bell. Allstate Corp. noted inflation in its call for the second quarter of August and said executives with higher repair costs “are dealing a heavy blow to homeowners.” Allstate announced its third-quarter results on November 3.

Dale Porfilio, chief insurance officer of the Insurance Information Institute, known as Triple-I, said timber prices have been very volatile this year, increasing 42% since September 2017. This is one of the most suitable indicators for home insurance companies’ repair costs. ..

National averages do not reflect greater suffering in the most dangerous places.

The Wall Street Journal’s Triple-I analysis, using S&P Global Market data, found California, Colorado, Florida, and Louisiana, as well as hurricanes, among the states with the highest number of homeowners in the past 21 months. And there was a forest fire. Intelligence. Regulators have approved an average annual increase of more than 9% for some policyholders in the state.

In addition, the government’s National Flood Insurance Program has begun reforming the insurance pricing practice many homeowners rely on for October 1 flood compensation. About a quarter of the interest to policyholders will be reduced, but some owners are facing a significant increase.

Alternatively, private sector options are becoming increasingly available, thanks to improved risk modeling and other technologies to identify the risks operators are willing to take. growth. The good news for consumers is that these alternatives are cheaper in some places and potentially offer broader government intervention.

With home insurance premiums skyrocketing, many Americans are looking for ways to cut costs. Insurers often offer home improvement discounts to reduce damage, such as:

In Melbourne Beach, Florida, Michael and Katie Brohorn must raise the award to $5,596 over three years in their 2,450-square-foot home.

They are Robinson Insurance Inc., an agency based in Indialantic, Florida. We spoke with Shane Robinson, owner of an insurance agency, about how to cut costs.

Last year they installed garage doors that were sturdy during hurricanes, upgraded some of the non-hurricane-resistant windows, hired a licensed housing inspector, and repaired roofs to strict building codes. It was recorded.

The cost of this transfer is about $3,000, and the annual premium has been reduced by about that amount.

“Basically we got all the money back in the first year,” said Brown.

Anna Weber, a senior policy analyst at the Natural Resources Conservation Council, said consumers could turn to government-funded grant programs to support grants for some projects. The federal flood protection assistance program is aimed at people who have experienced multiple floods and helps households to reduce the risk of future flooding, but especially with more expensive renovations, such as house elevations. I.

Weber directs users to state and local government programs to prevent low-level flooding, such as raising and lowering external HVAC equipment. Locals should check with local flood managers or risk mitigation officials to see what’s available and eligible, he said.

“Flood insurance doesn’t stop flooding. If the house is damaged by a flood, it can be a very important safety net, but you can get as much insurance as you need and it really isn’t preventable. ”

Angela Moore, a certified financial planner based in Orlando, says consumers should meet with insurance agents at least every one to three years to see if they are insured or not. Yes. Homeowners facing an increase can find fat that can be reduced, he said.

“This insurance policy is rechargeable so you can potentially remove some of those extras and keep any coverage you may need.”

An increase in insurance premiums is just one of the many financial difficulties many Americans face, including high costs for groceries, gas, heating, and rent.

Mahoney and Ilmint said that during the pandemic, some customers were reluctant to save for emergencies for more than a year. However, when flood premiums rise significantly, Mahoney encourages consumers to ignore their doubts and take advantage of their savings instead of making cheaper policy choices. He said it was better to pay for the hike and consider longer-term options than toss out the policy.

“If your main goal is to maintain financial stability, at least in the short term, it’s a good idea to do so when you can stand on your own and understand the next steps.” He says.